PEO vs EOR vs Staffing Agency: Legal Differences and When to Use Each (2026)

• PEO (US only): co-employment. Your company stays an employer; the PEO shares duties such as payroll, employment taxes and benefits. You need your own US entity.
• Employer of Record: the provider is the legal employer of someone you've chosen, and you direct their day-to-day work. You need no entity in the country.
• Staffing or temporary work agency: the agency employs workers in order to assign them to your business temporarily, under your supervision and direction. In the EU, agency workers are entitled to at least the pay and working conditions they would have if you hired them directly.
• Where they overlap: because an EOR's employee works under your direction, an EOR arrangement can fall under a country's temporary work or labour-hire rules. See EOR labour hire rules by country.

PEO. Under 26 U.S.C. § 7705(e), a certified PEO's written contract must make it responsible for paying wages, reporting, withholding and paying employment taxes, any benefits the contract requires and employee records, whatever the customer pays it, and for recruiting, hiring and firing in addition to the customer's own responsibility. Your company remains an employer, which is why you need your own entity. The IRS requires a certified PEO to have at least one physical business location in the United States.

Staffing or temporary work agency. The EU directive defines a temporary-work agency as one that "concludes contracts of employment or employment relationships with temporary agency workers in order to assign them to user undertakings to work there temporarily under their supervision and direction" (art. 3(1)(b)). During an assignment, the worker's basic working and employment conditions, including working time and pay, must be at least those that would apply if the user had recruited them directly for the same job (art. 5(1)).

Employer of Record. The provider employs the person under a local contract and runs payroll and contributions, while you direct the work. That combination is close to the directive's definition of agency work, which is why several countries regulate EOR arrangements as staff leasing or worker dispatch, with licences, time limits or equal-pay rules: Germany's 18-month AÜG limit, for example. Ask any EOR how its model complies in your country.

• Use a PEO if you already have a US company and want to outsource payroll, employment tax filings and benefits administration for US staff. See EOR vs PEO.
• Use an Employer of Record if you've chosen someone in a country where you have no entity and want them employed under a local contract. See EOR pricing by country.
• Use a staffing or temporary work agency if you need workers supplied for a temporary need, such as cover or a project, and are happy for the agency to provide them.
• Outside the US, the PEO is a US model, and what's sold as a "global PEO" works as an Employer of Record. See PEO outside the US.